Lululemon is leaning toward men to bolster growth

(Reuters) - Lululemon Athletica Inc is coming off two straight quarters of solid growth and is forging ahead with expansion plans that include a focus on menswear, a move that could breathe life into an ailing athleisure market.

In targeting men, the company has jumped into an arena dominated by the likes of Nike Inc and Under Armour Inc, and expects a billion dollar business for that division by 2020.

“Men’s is still one of our best-kept secrets,” Chief Executive Officer Laurent Potdevin said on a post-earnings conference call on Thursday with analysts.

Known for its yoga-inspired clothing, Lululemon’s lean toward men could be a good strategy, especially as rivals struggle in a lackluster market for athleisure gear - casual clothing designed for both exercise and everyday wear.

“In successfully pivoting from being a women’s brand to one that now appeals to both genders, Lululemon stands in marked contrast to Under Armour, which has seen only limited success in attracting women,” analyst Neil Saunders of GlobalData Retail said.

“This augurs well for the future as we believe Lululemon has much more runway with male shoppers.”

The company is prominently displaying men’s merchandise like its popular anti-ball crushing (ABC) pants and “anti-stink” items in its stores. Its new ABC swimming gear has also sold well.

Lululemon’s shares were up 7 percent at $61.72 on the New York Stock Exchange on Friday, a day after the company raised its full-year revenue forecast on strong demand for women’s clothes.

The men’s division gained traction as well, driven by a 23 percent jump in sales of pants and shorts.

Vancouver-based Lululemon does not break out sales for the overall men’s business, but analysts at JP Morgan said it accounts for about 13 percent to 14 percent of total sales.

Lululemon will debut its first dedicated marketing strategy for men in September, as part of its global “This is Yoga” campaign, launched in May.

Lululemon’s plan to go after men hits Nike, Under Armour and Gap Inc’s Athleta brand, and could also impact sales at retailers such as Dicks Sporting Goods.

“We believe weakness in Nike and Under Armour North America apparel sales creates share gain opportunity for Lululemon,” analyst Rafe Jadrosich of Bank of America Merrill Lynch wrote in a note earlier this month.

Lululemon is much smaller than Nike and Under Armour - Evercore analyst Omar Saad said the brand sold around 30 million units in North America over the last 12 months, compared with 100 million for Under Armour and Nike’s 350 million.

“Nike and Under Armour have suffered from a lack of innovation, over-distribution in moderate channels, and heavy promotions,” Jadrosich said.

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